After the initial news that long term care is needed has sunk in, the very next concern usually revolves around how that care will be financed, especially given the seemingly constant increase in care costs. One of the first things to come to mind for most individuals who have to pay for their care is that they do not want to lose the home that they own. This is usually the house that they have built into a home and they do not want to have to sell the home in order to pay for their long term care needs. Just learning that you or your loved one need long term care can create a stressful time in your life. Determining how to pay for it and worrying about losing your home can just be an added burden at a time that is already wrought with decisions.
If you learn that you need to go into long term care, there are in fact some ways that you can delay the sale of your property. These options include using an equity release scheme, using a 12-week property disregard, or entering into a deferred payment agreement. Every situation is different but these three options are ones that should be considered.
There are several different equity release schemes available and there really is no one size fits all option. However, for the most part, equity release gives you the opportunity to benefit from the value of your home while also allowing you to access some of that money that is tied up in the property. And you can do all of this without having to move out. Equity release schemes are not necessarily designed with long term care financing in mind. However, they can work the purpose of funding care because they can help you to generate additional income which can then be used to pay for the care you need.
Then there is the option of a 12-week property disregard which is a way in which your local authority can help with your care home fees for the first 12 weeks that you are living in a residential care facility. There are eligibility guidelines in order to qualify for this program. For example, your assets and capital, excluding the property in question, must amount to less than the threshold for long term care assistance and you have to show that your income is not sufficient to cover the fees of your care-home.
Lastly, in some instances your local authority may be able to offer you what is called a Deferred Payment Scheme. This usually takes place after the first 12 weeks that you have been living in care home which means that it follows the 12-week property disregard period. This scheme enables you to secure the cost of your care as a legal charge against your property. The debt will be repaid once the property is sold. If the repayment occurs within 56 days of your passing, the loan is interest free.
There is currently no obligation for your Local Authority to provide funding through a 12-week property disregard or a deferred payment scheme. For the most part, the Local Authority operates on their own budget and is really only able to assist so many long term care patients. That being said, the Government is currently looking at a change to the system which could see all Local Authorities having to offer secured loans on your home to cover the cost of your care. However, should this pass it may very well mean that interest will start to accumulate on these new schemes from day one. No repayments will be required as the debt together with the interest will be paid off from the eventual sale of the property.
Regardless of how you choose to fund your long term care, it is important to most individuals to keep their property while they are receiving care. An added benefit to this potential retention of your property would be that you could rent the property out which in turn could generate valuable income. So, the property could be earning money while you are not able to live in it. This income could be used to help cover some of your care costs, therefore leaving a smaller debt to build up on the property and a smaller repayment to the local authority. However it is determined that you will pay for care, it is important to work with a financial adviser to ensure that you are maximizing all assistance that may be available to you to help fund your care needs.